PPM Explained – Our Guide to Prepayment Meters

05-02-2016 Posted by:Manny Kapur

What are prepayment meters?

A prepayment meter (sometimes known as a pay as you go meter) is a type of energy meter which allows people to pay for their energy before they use it and works similarly to a pay as you go mobile phone contract.

According to industry regulator Ofgem, prepayment meters are currently installed in 15% of UK properties, which equates to roughly 4 million households.

Prepayment meters work by the bill payer topping up a key or smart card at a pay point, then inserting this into the meter itself, which then adds the credit to your meter. The meter will then use this credit until it runs down to zero and more money will need to be added to the card to access more gas and electricity.

Why do households have prepayment meters?

Prepayment meters are typically installed into homes that are in debt with their suppliers perhaps due to a number of large bills. The idea is that a prepayment meter will limit a household’s spending, helping them to budget through a better understanding of how much they are spending. Naturally households will also want to top up less often which also helps curb their spending.

Prepayment meters are often popular with landlords too as they help ensure that tenants don’t leave any unpaid energy bills when moving out, or sometimes new home owners will just inherit prepayment meters from the previous owners and just haven’t bothered to replace them.

Can I switch to a different supplier with a Prepayment Meter?

Yes, prepayment customers can still switch their energy supply to a different supplier. However, there are a lot less suppliers offering prepayment tariffs, particularly the cheaper end suppliers. This obviously means you’ll have less choice when switching and typically won’t save as much as the households on a standard meter.

Generally, being on a standard meter is the cheaper option of the two. This is due to a number of cheaper suppliers not offering tariffs to prepayment customers. In fact, even suppliers who offer the same tariff for both monthly direct debit and prepayment tend to charge customers on prepayment higher unit rates.

What are the advantages and disadvantages of a prepayment meter?

The disadvantages of having a prepayment meter easily outweigh the advantages. The only real advantage of having a prepayment meter is that you are never going to receive a large bill as you’re paying for your energy as you use. However, the disadvantages include being charged higher rates for your energy, wasting time topping up your meter, lower savings when switching supplier and having a smaller choice of suppliers to switch to.

Switching from a prepayment meter to a credit meter

You may have just moved into a new home which has a prepayment meter rather than a credit meter. The first thing to do is to speak to your current supplier and request a meter change. However, be aware that each supplier will have a different policy in place when exchanging prepayment meters for standard meters.

Some suppliers are relatively easy-going and will simply request that you stay with them for a certain length of time before coming round and exchanging the meter. There are also cases where suppliers will refuse to remove a prepayment meter unless you pass a credit check, or even worse charge you a fee to cover the cost of an engineer coming out to change the meter.

At times suppliers have been known to waive credit checks or fees if you sign up to a fixed tariff with cancellation fees. This ensures that you will either stay with them until your tariff expires, or leave early and be subject to cancellation fees that will cover the cost of the meter change.

In the event that your supplier simply refuses to let you move to the cheaper standard meter, it may be worth considering switching to a supplier that won’t refuse. The best way to guarantee that your prepayment meter will be removed when moving supplier is to go online and view the company policies of different suppliers. Once you find a supplier with relaxed rules on switching meters, run a comparison and switch to the cheapest so at least you’re paying less while waiting for a new meter.

Once your new meter has been installed you are free to switch to the cheaper tariffs that are available on the market. You should run a comparison using an Ofgem accredited site such as energyhelpline.com as this will give you a whole of market comparison and ensure you can view every tariff currently available to you.